Do Money, Prices, Incomes and Interest Rates Interrelate in the U.S.? A Fractional Cointegrated VAR Approach

The paper addresses the empirical application of cointegration analysis to four important macroeconomic variables: narrow money (M1), incomes, prices and interest rates in the U.S. during the turmoil period of last decade. Unit root and longmemory tests support the appropriateness of the Fractionally Cointegrated VAR model to take account the long-memory behaviour. Results conclude that a long-run relationship between these macroeconomic variables exists. This suggests a sufficiently stable monetary policy taken by U.S. government and the FED